BP Plans to Produce First Natural Gas in Oman by 2016

BP Plc (BP/) plans to start commercial development of a natural-gas project in Oman by February 2013 and to produce the first gas by 2016, the company’s general manager in the sultanate said. BP estimates that Oman’s Block 61 contains 100 trillion cubic feet of the fuel locked in rocks as much as five kilometers (3.1 miles) underground, Jonathan Evans said at a conference in Muscat, the Omani capital. The company expects to invest $15 billion to $20 billion to develop the field and drill 300 wells over 15 years, he said.

“I believe we will reach commercial agreement with the government and this project will move ahead,” Evans said. BP and Royal Dutch Shell Plc are Europe’s biggest oil companies. Oman and other Persian Gulf countries including the United Arab Emirates, Saudi Arabia and Kuwait face rising gas demand for power and industry amid limited supplies. Some are turning to more technically challenging and expensive projects to produce the fuel.

BP’s so-called tight gas project would maintain the sultanate’s current gas output in the medium term and may raise output in the long term, Evans said. The company would build a plant able to produce 1.2 billion cubic feet a day over at least 10 years with room to expand output further, he said. BP has spent $700 million appraising deposits of tight gas and is producing at three of nine wells it has drilled, he said.

BP plans to submit a field development plan to the Omani government by next April and will issue tenders “soon after that,” Evans said. The company seeks to receive bids for the project by the end of next year and use the price data to complete commercial negotiations with the government, he said. A final investment decision would be made by February 2013, he said. “Pricing will be an important part” of negotiations with the government, Evans said. “BP needs to see some return on that very large investment.”